Purdue Pharma L.P. et al v. Ranbaxy Inc. et al
Filing
160
OPINION & ORDER: Because Actavis's proposed Fourth Affirmative Defense appears plausible on its face and because Actavis's delay caused no prejudice to Purdue, the Court grants Actavis leave to amend its Answer and Counterclaims in the form attached to the Affidavit of Gregory K. Sobol ski, Esq., dated May 2, 2012 as Exhibit A. Actavis is directed to file that document within five business days of the date of this Opinion and Order. (Signed by Judge Sidney H. Stein on 9/5/2012) (ft)
USDCSDNY
DOCUMENT
ELECfRONICALLY FILED
DOC #:
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------~~~-----DATE FILED: '1J 15l1l...
_____________________________x
PURDUE PHARMA L.P,
THE PF. LABORATORIES, INC.,
PURDUE PHARMACEUTICALS L.P,
AND RHODES TECHNOLOGIES,
10 Civ. 3734 (SHS)
OPINION & ORDER
Plaintiffs and Counterclaim Defendants,
-againstRANBAXY INC.,
RANBAXY PHARMACEUTICALS INC.,
RANBAXY LABORATORIES LTD.,
ACTAVIS ELIZABETH LLC,
MYLAN PHARMACEUTICALS INC.,
and MYLAN INC.,
Defendants and Counterclaim Plaintiffs.
-----------------x
SIDNEY H. STEIN, U.S. District Judge.
Actavis Elizabeth LLC has moved for leave to amend its Answer and Counterclaims
to include the affirmative defense of collateral estoppel. Plaintifis Purdue Pharma L.P,
The PF. Laboratories, Inc., Purdue Pharmaceuticals L.P., and Rhodes Technologies
(collectively, "Purdue") oppose Actavis's motion principally on the grounds that
Actavis's collateral estoppel theory is meritless and therefore any amendment would be
futile. Purdue additionally contends that Actavis's request should be denied as untimely.
Because Actavis's defense appears plausible on its face and because Actavis's delay
causes no prejudice to Purdue, the Court grants Actavis leave to amend its Answer and
Counterclaims.
I.
Background
This Hatch-Waxman action is one of many in which Purdue has sued to stop other
drug manufacturers from producing generic equivalents of Purdue's OxyContin pain
reliever. Here, Purdue claims Actavis, Ranbaxy, and Mylan have infringed three of
Purdue's patents: Patent No. 7,683,072 ('''072''); Patent No.7,674,799 ("'799"); and
Patent No. 7,674,800 ("'800"). These patents resulted from Purdue's multi-year effort to
reduce the amount of a chemical impurity present in oxycodone tablets and patent its
work. Chapman v. Casner, 0315 F. App'x 294, 295 (Fed. Cir. 2009).
Purdue believed that it had invented a novel way to reduce this impurity, 14
hydroxycodeinone ("l4-hydroxy"), and in 2005 applied for U.S. Patent No. 7,129,248.
('248 Patent, Ex. D. to Decl. of Sona De dated May 21,2012.) That patent was "directed
to a process for preparing [oxycodoneJ having less than 25 ppm of 14
hydroxycodeinone." (Id.) Purdue subsequently filed a continuing application, No.
11/391,897 ("'897"), that claimed a process for reducing 14-hydroxy by converting a
chemical intermediate 8, 14-dihydroxy-7, 8-dihydrocodeinone ("8, 14-dihydroxy") into
14-hydroxy, and then converting 14-hydroxy into oxycodone. Chapman, 315 F. App'x at
295 (discussing claim 96).
During an interference proceeding before the U.S. Patent Trade Office Board of
Patent Appeals and Interferences, the PTO considered whether Purdue could patent the
process it described.! The PTO rejected Purdue's claim as obvious. Id. at 297-98. The
Federal Circuit affirmed, concluding that the prior art disclosed "conditions suitable to
promote reaction of 8, 14-dihydroxy to 14-hydroxy" because it was known that the 8~
form of 8, 14-dihydroxy "will under certain reaction conditions form 14-hydroxy." !d. In
other words, scientists working with oxycodone had already discovered that 8~, 14
dihydroxy could be transformed into 14-hydroxy, so it was not novel to propose that 8,
14-dihydroxy (whether 8a or 8~) could be transformed into 14-hydroxy and, in turn,
transformed into oxcodone. Id. at 297-98.
The patents in this action each continue from the '897 application. Like the '897
application, the '799 patent, '800 patent, and the '072 patent are each "directed to a
process for preparing an oxycodone hydrochloride composition having less than 25 ppm
of 14-hydroxycodeinone." (Patent No. 7,674,799, Ex. A to De Decl.; Patent No.
7,683,072, Ex. B. to De Decl.; Patent No. 7,674,800, Ex. C to De Decl.)
Actavis now seeks to amend its Answer and Counterclaims to state that "Plaintiff
is barred from asserting claims of the '799, '800 and '072 patents by the doctrine of
collateral estoppel" as a Fourth Affirmative Defense.'.! (Proposed Amended Answer at 7,
Ex. A to Decl. of Gregory K. Sobol ski dated May 2, 2012.) According to Actavis,
certain of Purdue's patent claims have been foreclosed by the Federal Circuit's
determination in Chapman v. Casner. Actavis disclosed its collateral estoppel defense to
1 As discussed below, the parties dispute whether the PTO also considered other claims made in the
'897 application.
• Similar motions have been filed by defendants in four other OxyContin patent actions: No. 11 Civ.
2037 (Teva Pharmaceuticals USA, Inc.), No. 11 Civ. 2038 (Actavis), No. 11 Civ. 2400 (Impax Laboratories,
Inc.), and No. 11 CIV. 8153 (Am neal Pharmaceuticals, LLC). The Court has today resolved those motions by
separate Orders, relying on the reasoning of this Opinion & Order.
Purdue on March 2,2012 (Actavis Supp. Responses & Objections to PIs.' Interrogatory
No.7 dated March '2, '2012, Exhibit B to Sobol ski Decl), formally requested Purdue's
consent to an amendment on April 12,2012 (Email from K. Schuler to P. Hendler dated
April 1'2, '2012, Exhibit E to Sobolski Decl), and fIled this motion for leave to amend on
May 2, 2012 (Dkt. No. lS9). Actavis had previously proposed October 14,2011, and
Purdue had previously proposed March 1,2011, as the deadline to amend the pleadings.
(Rule '26(f) Report, Dkt. No. 101.) Actavis attributes its delay to facts discovered during
the February 16,2012 deposition of Oleg Ioselevich. (Actavis Mem. in Support of
Motion for Leave to Amend 7.)
II. Discussion
Federal Rule of Civil Procedure 15(a)(2) instructs this Court to "freely give leave
[to amend] when justice so requires." But the Court may deny leave to amend for
"undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to
cure deficiencies by amendments previously allowed, undue prejudice to the opposing
party by virtue of allowance of the amendment, futility of amendment, etc." Ruotolo v.
City 0/ New York, 514 F.sd 184, 191 (2d Cir. 2008) (quotation marks and citation
omitted).
Purdue urges the Court to reject Actavis's proposed amendment as futile and also
as untimely. The Court accepts neither argument.
A. Actavis's proposed amendment is not futile.
1.
Standard
Ordinarily a proposed amendment would be futile if it could not withstand a Rule
12(b)(6) motion to dismiss. Parker v. Columbia Pictures Indus., 204 F.sd S26, SS9 (2d Cir.
2000). Where the proposed amendment concerns an affirmative defense, however,
"futility ought technically turn on the proposed defense's legal sufficiency and whether
it is subject to a motion to strike under Fed. R. Civ. P. 12(f)." Credit Suisse First Boston,
LLC v. Intershop Commc'ns AG, 407 F. Supp. '2d 541,546 (S.D.N.Y 2006). Rule 8(C)(l)
casts estoppel as an affirmative defense; therefore, the futility of Actavis's proposed
amendment turns on whether the Court would strike that defense as "insufficient"
pursuant to Rule 12(f).
Insufficiency has three hallmarks: "( 1) there must be no question of fact that might
allow the defense to succeed; ('2) there must be no substantial question of law that might
allow the defense to succeed; and (S) the plaintiff must be prejudiced by the inclusion of
the defense." Coach Inc. v. Kmart Corps., 756 F. Supp. 2d 4'21, 425 (S.D.N.Y 2010). This
exacting standard reflects the courts' disfavor of motions to strike. See William Z. Salcer,
Fanfold, Edelman v. Envicon Equities Corp., 744 F.2d 935, 939 (2d Cir. 1984), vac'd on other
grounds
lry478
U.S. 1015 (1986).
After Bell Atl. Corp. v. Twombly, 550 US. 544 (2007) and Ashcroft v. Iqbal, 556 US.
662 (2009), courts in this circuit have differed in the doctrinal standard they use to
assess whether any question of law or fact exists so as to make a defense legally
insufficient. Before Twombly and Iqbal, courts struck affirmative defenses only when "it
appear[ed] to a certainty that plaintiffs would succeed despite any state if thefacts which
could be proved in support of the defense." Sauer, 744 F.2d at 939 (emphasis added).
Some district judges in this circuit have reasoned that Twombly concerned only Rule 8(a)
claims for relief, not Rule 8(C) affirmative defenses, and thus did not change the standard
for assessing a motion to strike. E.g., Aros v. United Rentals, Inc., No. 10 Civ. 73, 2011 WL
5238829, at *1-3 (0. Conn. Oct. 31, 2011). Others have concluded that the pleading
standard articulated in Twombly and Iqbal applies to motions to strike as well. E.g.,
E.E.o.c. v. Kelley Drye & Warren, LLP, No. 10 Civ. 655, 2011 WL 3163443, at *2
(S.o.N.Y. July 25, 2011); Coach, Inc. v. Kmart Corps., 756 F. Supp. 2d 421,425 (S.o.N.Y.
2010); Aspex Eyewear, Inc. v. Clariti Eyewear, Inc., 531 F. Supp. 2d 620, 622-23 (S.o.N.Y.
2008); Burck v. Mars, Inc., 571 F. Supp. 2d 446, 456 (S.o.N.Y. 2008). The Court need not
enter this debate because Actavis's defense satisfies the higher standard of Twombly.
2.
Actavis's collateral estoppel defense is plausible.
Considering the proposed amendment alongside the Chapman opinion, the Court
concludes that Actavis has proposed the legally sufficient defense that Purdue has
previously litigated and lost some of the patent claims at issue here.
a)
Collateral estoppelforecloses patent claims that are "patentably indistinct"
from rEjected claims.
'1\ judgment in an action precludes relitigation of claims or issues that were or
could have been raised in that proceeding." In re Deckler, 977 F.2d 1449, 1452 (Fed. Cir.
1992). The Federal Circuit "has applied interference estoppel to bar the assertion of
claims for inventions that are patentably indistinct from those in an interference that the
applicant had lost." Id. Importantly, the Federal Circuit assesses estoppel by considering
"whether the issue of invalidity common to each action is substantially identical," not
whether the "specific claims around which the issues were framed" are the same.
Westwood Chem., Inc. v. United States, 525 F.2d 1367, 1372 (Ct. CI. 1975).
b)
Actavis states a plausible theory if collateral estoppel.
The pleadings and public documents on which Actavis relies plausibly suggest that
Purdue has previously litigated the patentability of at least certain of the claims here.
Purdue previously defended the patentability of low-impurity oxycodone:
4
•
Purdue previously sought to patent the process of producing low impurity
oxycodone. Chapman, 315 F. App'x at 295.
•
Purdue explicitly claimed a process that transformed 8, 14-dihydroxy into 14
hydroxy, whether from the 8a or 8~ stereoisomer. Id. at 297.
•
The Federal Circuit concluded that Purdue's method was obvious in light of
prior knowledge that 8~,14-dihydroxy could be converted into 14-hydroxy. /d.
•
The dissent to the Federal Circuit opinion makes many of the points Purdue
advances here, including that Purdue discovered 8a and that its method to
reduce 14-hydroxy by manipulating 8a was new and useful. /d. at 298, 300.
Purdue's arguments in this action echo its prior presentation in the interference
proceeding. As in the interference, the claims here concern a process for producing low
impurity oxycodone. As in the interference, Purdue argues that it has created low
impurity oxycodone by manipulating 8, 14-dihydroxy. As in the interference, Purdue
attaches significance to its work in identifying the 8a steroisomer and recognizing its
importance. These similarities make Actavis's collateral estoppel argument plausible for
the purposes of this motion.
In response, Purdue contends that Actavis's theory will fail as a matter of law
because the specific patent claims in this action were not litigated in Chapman.
Specifically, Purdue asserts that Chapman did not consider (1) an oxycodone product
with a specified level of 14-hydroxy or (2) a product containing oxycodone derived from
a specified chemical intermediate. (Purdue'S Opp. 12.) Purdue may be correct, but
neither of Purdue's points of contrast precludes Actavis's defense at this stage.
First, as to the impurity limitation, the Chapman panel stated that it "affirm[edJ the
Board's decision to reject claims 96-118 of the '897 application." Chapman, 315 F. App'x
at 298. Claims 115, 116, 117, and 118 each reference a 14-hydroxy limit. ('897
Application App'x 1, Ex. E to Reply Decl. of Gregory K. Sobolski dated May 31,2012.)
Based on the Chapman decision, Actavis has grounds to argue that Purdue has
previously litigated the patentability of a process to reduce 14-hydroxy product to a
specified purity level.
Second, as to the source limitation, unpatentable products may not be made
patentable by imposing a process limitation on them. SmithKline Beecham Corp. v. Apotex
Corp., 439 F.3d 1312, 1317 (Fed. Cir. 2006). After all, ,,[tJhe patentability of a product
does not depend on its method of production. If the product in a product-by-process
claim is the same as or obvious from a product of the prior art, the claim is unpatentable
even though the prior product was made by a different process." In re Thorpe, 777 F.2d
695,697 (Fed. Cir. 1985); Amgen, Inc. v. Hrif.fman-La Roche, Ltd., 580 F.3d 1340, 1366
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(Fed. Cir. 2009) (citing Thorpe). Applying that rule, if low-impurity oxycodone made by
manipulating 8a. is indistinguishable from low-impurity oxycodone made by
manipulating 8~, as Actavis contends, then Purdue's process limitation has no legal
significance. Purdue merely developed a different process for making an existing
product. Cf Thorpe, 580 F.3d at 1340. As a result, the claims rejected as obvious in the
'897 application may estop the claims here, notwithstanding a difference in the chemical
source of the oxycodone. See In re Deckler, 877 F.2d 1449, 1452 (Fed. Cir. 1992).
Third, the presence of disputed facts and law suggest that Actavis's defense should
not be precluded as futile. As noted above, motions to strike--and by extension
assessments of futility-are improper vehicles for fact finding. Coach Inc. v. Kmart Corps.,
756 F. Supp. 2d 421, 425 (S.D.N.Y. 2010). Here the parties behave as though the legal
sufficiency of the collateral estoppel defense cannot be assessed without resort to
evidence: Actavis attaches various documents to its motion, including interrogatories,
expert opinions, and emails. (See Exs. B, E, F, & G to Sobol ski Decl.; Ex. D to Sobolski
Reply Decl.) Purdue attaches correspondence, interrogatories, and a deposition
transcript. (See Exs. J-N to De Decl.) And the parties cite to, and rely on, these
documents and others in their arguments. Most sharply, the parties dispute the novelty
and import of Purdue's 8a. work, whether 8a. is process limitation, and, if so, the extent
to which the Federal Circuit considered it. But a motion for leave to amend does not
present an appropriate vehicle for the Court to weigh the significance of 8a. or its
discovery; examine the factual record before the Federal Circuit, or consider deposition
testimony. These factual disputes are appropriate for resolution only on a fuller record.
B.
Actavis's delay does not justify denying it leave to amend.
1.
Standard
Delay may justify denial of leave to amend if the party seeking to amend acted in
bad faith, if the amendment would prejudice the opposing party, or if the amendment
would effect an unjustified amendment to a Rule 16(b) scheduling order. See Parker v.
Columbia Pictures Indus., 204 F.3d 326, 339 (2d Cir. '.2000); Block v. First Blood Assocs., 988
F.2d 344, 350 (2d Cir. 1993). In assessing prejudice, courts consider whether the
amendment would "(i) require the opponent to expend significant additional resources
to conduct discovery and prepare for trial; (ii) significantly delay the resolution of the
dispute; or (iii) prevent the plaintiff from bringing a timely action in another
jurisdiction." Block, 988 F.2d at 350. "[TJhe longer the period of an unexplained delay;
the less will be required of the nonmoving party in terms of a showing of prejudice." !d.
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2.
Actavis has explained its delay and Purdue faces insignificant
prtjudice.
Weighing Actavis's delay, its excuse, the likely prejudice, and consequences for this
action, the Court concludes that allowing the amendment will promote justice.
First, Actavis has explained its delay. Actavis contends that it timely moved to
amend its answer once it discovered facts to support the collateral estoppel defense
during the February 16,2012 deposition of Oleg Ioselevich and subsequent
interrogatories. (Actavis Mem. 7.) Indeed, Actavis proposed its amended answer less
than one month later. (Actavis Supp. Responses & Objections to PIs.' Interrogatory No.
7 dated March 2, 2012, Exhibit B to Sobolski Decl.) Purdue responds that the public
record would have allowed Actavis to "easily assess[J this defense back when it pleaded
this case." (Purdue's Opp. to Motion to Amend 16.) The Court agrees. But the Court
also recognizes that the strategic significance of collateral estoppel became undeniable
after Purdue began to focus on the 8a.limitation at the same time that its witness
disclaimed a meaningful difference between 8a. and 8~. The Court accepts that these
events prompted Actavis to seek to amend its Answer and Counterclaims.
Second, Purdue faces insignificant prejudice. Purdue states that it "will likely need
to consider retaining its own such expert to prepare a responsive opinion." (Purdue Opp.
17.) But if Purdue retains an expert it will do so because Actavis has asserted a
collateral estoppel defense, not because Actavis delayed in asserting the defense. Purdue
has not articulated a cost that might have been avoided had Actavis acted sooner. E.g.,
Evans v. Syracuse City Sch. Dist., 704 F.2d 44, 48 (2d Cir. 1983). Nor does Purdue show
that it has forfeited some legal right because of Actavis's delay. E.g., Strauss v. Douglas
Aircraft Co., 404 F.2d 1152, 1157-58 (2d Cir. 1968). Nor will the amendment delay the
resolution of the parties' dispute. Cf Block, 988 F.2d at 350. In fact, defendants in other
actions have timely sought to amend their answers to include an estoppel defense. As
Purdue has opposed those motions on the futility grounds rejected above, Purdue will
have to litigate this defense in other actions concerning the '072, '799, and '800 patents.
Purdue loses little by litigating this issue in this action, too.
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III. Conclusion
Because Actavis's proposed Fourth Affirmative Defense appears plausible on its
face and because Actavis's delay caused no prejudice to Purdue, the Court grants
Actavis leave to amend its Answer and Counterclaims in the form attached to the
Affidavit of Gregory K. Sobol ski, Esq., dated May 2, 2012 as Exhibit A. Actavis is
directed to file that document within five business days of the date of this Opinion and
Order.
Dated: New York, New York
September 5, 2012
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